Listing fee dues cannot be recovered under operational debt: NCLAT while dismissing BSE petition

Dues on the listing fees against a company are ‘regulatory dues’ in nature and cannot be recovered under ‘operational debt’ through insolvency proceedings, said the National Company Law Appellate Tribunal (NCLAT) while dismissing an appeal by stock exchange BSE.

Listing fees comes under the ambit of ‘regulatory dues’, which markets regulator Sebi is entitled to recover, and the defaulting company being an entity registered under Sebi is under an obligation to follow the regulations prescribed by the regulator for the recovery of its dues, observed the NCLAT.

“The dues so said are not ‘operational dues’ but ‘regulatory dues’. The Insolvency Law Committee suggests that regulatory dues are not to be recovered under ‘operational debt’,” observed a two-member NCLAT bench comprising Justice Anant Bijay Singh and Shreesha Merla.

The NCLAT also upheld the order passed by the National Company Law Tribunal (NCLT) on December 31, 2020, which had dismissed the plea of the BSE to initiate insolvency proceedings against KCCL Plastic Ltd.

“We have carefully examined the pleadings of the case and came to the conclusion that no interference is required in the impugned order. Hence, the impugned order dated December 31, 2020, passed by NCLT, Ahmedabad Bench is hereby affirmed. The Appeal is dismissed,” said the NCLAT.

The securities of Ahmedabad-based KCCL Plastic Ltd were listed on the trading platform provided by the BSE on October 27, 1993, and as per the listing agreement, it had to pay an annual listing fees (ALF) on or before April 30 every year.

According to BSE, KCCL Plastic made payments of the ALF till the financial year 2013-14 after that it failed to make any payment.

The BSE has raised several invoices of ALF with arrears and KCCL Plastic willfully neglected to remit, the bourses submitted.

A demand note of Rs 10.66 lakh dated March 15, 2019, was dispatched and the respondent refused to acknowledge such service. The Demand Notices that were sent to addresses were returned undelivered bearing end, it added.

Following this, the BSE filed a petition before the NCLT under Section 9 of the Insolvency and Bankruptcy Code claiming an operational debt.

It claimed that ALF constitutes a continuous cause of action and is intrinsically linked to the services enabled and provided by the BSE and continuously availed by KCCL Plastic till 2019 despite such defaults.

However, the NCLT has rejected the BSE’s petition on technical grounds. It said the plea filed by the BSE was barred as it has filed after the limitation period of three years. The debt failed due April 1, 2015, it had said.

Moreover, the NCLT had also observed that in the agreement between the parties, some of the pages/ places are found blank and no remarks are given to that effect.

However, the agreement contains the initial of the parties only on the last page and none of the pages of the agreement contains the signature of the parties and it also found that the agreement was entered between ‘Kosha Cubidor Containers Ltd’ with the Stock Exchange of Bombay.

“However, there is no seal and signature for and on behalf of the Stock Exchange of Bombay. Admittedly, the name of ‘Kosha Cubidor Containers Ltd’ changed to KCCL Plastic Ltd., but to that effect, no agreement has been entered by the petitioner with that of KCCL Plastic Ltd,” the NCLT had said.

The NCLAT also consented with the findings of NCLT and said, “We are of the considered view that the adjudicating authority (NCLT) has rightly come to the conclusion that the agreement so filed cannot be relied upon, as the same is not a valid agreement in the eye of the law.”